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Financial Reporting
FASB Interprets FAS 143
The Financial Accounting Standards Board (FASB) has issued an interpretation
on the application of FAS 143 — Accounting for Asset Retirement Obligations
(AROs) — to “conditional AROs.” FASB reached its decision
over strong objection from several major industry groups.
In effect, the interpretation means companies can no longer avoid recognition of AROs, including environmental cleanup obligations, simply by claiming that the company has no current plans for retiring the asset. The interpretation will be effective for the 2005 calendar year.
There is speculation that the new FAS 143 interpretation will have significant
implications for public companies’ internal control preparation activities
and audits under Section 404 of Sarbanes-Oxley. This, in turn, could generate
increased liability exposure for corporate directors and officers.